Forum: Sen. Elizabeth Warren waking consumers up to realities of financial system

By Lloyd Buzzell

Published 6:00 pm, Wednesday, May 28, 2014

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Democratic U.S. Senate candidate Elizabeth Warren, right, takes questions from members of the media as Mass. Gov. Deval Patrick, left, looks on during an event at Warren's campaigns headquarters, in Somerville, Mass., Wednesday, May 30, 2012, during which Patrick formally endorsed Warren in her campaign for the Senate seat. (AP Photo/Steven Senne) less

Democratic U.S. Senate candidate Elizabeth Warren, right, takes questions from members of the media as Mass. Gov. Deval Patrick, left, looks on during an event at Warren's campaigns headquarters, in Somerville, ... more

Photo: AP

Forum: Sen. Elizabeth Warren waking consumers up to realities of financial system

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I am not in the habit of reading books by politicians as they are usually just campaign literature. But I have such strong feelings about what Elizabeth Warren is doing for everyday Americans that I looked forward to reading her recently released “A Fighting Chance.”

In case somehow you have managed not to hear of her, she is a former Harvard Law School professor who conceived of the Consumer Financial Protection Bureau, fought for its creation and ran it initially. Subsequently, she was elected to the U. S. Senate.

First, let me explain why I think her work is so important. I counseled families who were in financial distress at a non-profit service for 11 years. My days were filled talking to people overextended on credit cards or behind on rent, car payments, medical bills or mortgage(s). Their days, in turn, were spent talking to aggressive debt collectors. I would assess each client’s situation to see if we could work out an overall plan to meet their priorities and manage their debt. Given how far things had gone with some, however, we frequently concluded that the only solution was to seek the protection of bankruptcy.

I was a front-line counselor, not a Harvard Law School professor, but I learned the truth of two things at the center of Senator Warren’s academic and political career. First, that those who have sunk into dire financial distress and in need of bankruptcy protection are neither irresponsible nor immoral — as common wisdom and creditors might have you believe.

They are people just like you and me. They may have made a misstep but, more likely, they simply overestimated their financial stability and were caught unprepared for a pink slip, a medical situation or the financial fallout of a failed relationship. She is right in saying, “They were mostly good people caught in a bad situation.” They wanted to pay their bills but just could not. As a group, they felt stupid and were deeply shamed at what they saw as their failure.

The second point of Senator Warren’s with which I agree is that the business plan of the big banks and the way they issued consumer credit was irresponsible and uncaring. She believes the big banks brought about the 2008 financial collapse and knowingly caused American consumers incalculable suffering. In the deregulated environment in which they were operating, the big banks used reckless practices to take advantage of consumers through offering overly complicated products with escalating interest rates and hidden fines and fees. Their sole goal was maximizing profit.

The banks targeted people who were unsophisticated about credit like college students, young soldiers and consumers with poor credit histories. When payment problems developed, they offered more credit to solve the problem. They also suggested home equity loans even though this put the family’s home at risk of foreclosure.

Warren writes about banks whose overall profit model was based on “tricks and traps” — exactly what many of my clients were caught up in. And, as all this was going on, the big banks, infinitely better connected and represented in Washington than any consumer group, were aggressively lobbying to make it more difficult for people to seek refuge in bankruptcy.

Again, I was on the front line, not walking the corridors of Washington or consulting at Citibank as she was, but I could see the banks’ business plans unfolding in the lives of my clients. Her larger perspective coincides with my much smaller view: the system is rigged in favor of the big financial institutions such that, without some real changes, consumers do not have a fighting chance.

After serving as the interim director of the Consumer Financial Protection Bureau, she returned to Massachusetts where she was swept up in an unlikely but successful run for the Senate. Her first act as a senator was to ask why large financial institutions are profiting from the student loan programs and to require the Federal Reserve to lend to students at the same rate as they do to the big banks.

A realist, Senator Warren knows the Consumer Financial Protection Agency is a fragile creation and that her advocacy on behalf of consumers has powerful enemies. But her continuing impact on our national conversation is critical. She is waking us all up to the fact that consumers — that is you and I — desperately need protection from large financial institutions.